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wettt

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Posts posted by wettt

    Credit Standing

    in Money, Finance, Investments, Crypto, Stocks, Banking, Business, Loans

    Posted

    Actually, an antidote for a bad credit rating/history is another loan -- especially that this time around, you are able to show good paying habits. This may be a little difficult, but possible. And you may need to repair this soonest because the longer it stays, and the older you get, you may not have another good enough chance to redeem yourself. I'm speaking from experience here, so I'd say it is absolutely "possible"...

     

    You'll need to repair your record by the following:

    1. Of course, first you'll need to settle the loan and arrears. Rather than hiding from your creditors, meet them face to face and you'd be surprised that most of the time, they're easy to talk to. Remember that even if they already cancelled your loan or credit card, they're still charging you interest until you show resolve to pay up. When you meet with them, you can explain your situation and could very well be able to forge an understanding beneficial for both. Remember, the bank is a large institution and your loan may only be a small dot in their books, but that they need to do it to protect their interests. If and when you decide to conquer your pride and meet up with them, they don't care how long you'd be able to pay so long as they are able to collect. If you notice, most of the time, it's not the bank doing the collecting but an agency -- meaning 40% of whatever is collected goes to the collection agency -- so they don't really care -- they just want to piss you off. In my case I was able to fulfill 3 things: stop the interest from accumulating; cut half of the interest charges after the loan default, work out an arrangement that had me paying less than 5K monthly until everything was settled.

     

    2. When you have worked a payment arrangement, promise yourself not to go into any other type of loans and then default. After the last cheque clears, approach the bank and ask for a written certification of full payment. Make sure you keep a copy.

     

    3. Build up your bank account, surrender your cards and keep paying cash. You'll need to lie low for a while. I lived the next 5 years after paying my debts without any plastic wallet or loans.

     

    4. When you're finally on your feet again (you'll know your financially stable once you regained your self-confidence back. Admittedly, a lot of self-confidence is lost once you fall into debt -- it's mostly taken up by self-pity and a self-deprecating attitude), train yourself to be financially responsible by resisting the urge to own any credit cards until you develop a good paying habit. One way to develop the habit is to pay your taxes in full and without any intent to deceive. What for? It's not so much about care for the government or love of country... you need the papers to show for it. The ITR tells these lending institutions about your earning power and your capacity to pay. Maybe you need to keep up 3 years' worth of evidences after you've completed paying off your bad loan.

     

    5. Sadly, you need another loan to erase a bad loan record. This is so true. House or car? Take your pick but never a cash loan. Why? The bank needs to trust you again, remember? One way for them to be comfortable is to have something to hold on to just in case you default again: a collateral. Of course, you need a percentage as equity, that's when the bank account comes in handy, but never zero it out. You need the savings account to show them that you are really saver not a spender, if you can help it.

     

    6. A car loan may be easiest, but you may need to fork out as much as 40% as equity or downpayment since you've got a bad financial reputation. You will still be tagged a "very high risk" customer, but never be discouraged, it's normal -- own up to your fault. Show them your savings portfolio, payslips, ITR, the full-payment letter, plus 3 good character references may be required (be careful who you elect -- since if their bad payors themselves, then you'll get yourself into more trouble) These character references need to have good character themselves as far as the banks are concerned. Oh btw, when you do decide to take out a car/house loan to repair your record, it doesn't need to be in the same financial institution as where you got into trouble; ideally, you should seek out another institution with a good customer-focus than the lust for profit.

     

    7. Once you do succeed in taking out the loan, again, do the best you can to pay up on-time and as agreed-upon. Depending on the term of the loan, you may opt to finish it or preterminate at some point, but make sure that you have spent at least 2 years of paying up -- 3 years is more ideal. Once you do finish the loan, voila, you're clean as clean can get.

     

    Here's my story:

    1992, I was in 3rd year college when I got a credit card because the manager of the bank was a good friend of a family member. So I had the family member sign up as co-maker. 20K credit limit. No big deal! So I got gadgets left and right and had it on 12-month installments. Well, I was very careful then, I made sure the total monthly amortizations did not exceed 1K. After college, I got invited by a benefactor to visit Australia -- they paid half the fare, I shouldered the rest. Where else to get the money? Oh, great, the travel agency accepts credit cards -- so I charged -- got debited for 10K. Before leaving, I instructed a family member to pay the minimum: 5% monthly. How much does it total to? 550 pesos -- oh, it's very cheap -- I still had my allowance then; I bargained with my guardians to keep it flowing until I land a job and receives my 3rd month salary -- but for the meantime, I'll travel as a gift to myself.

     

    The 2-week break easily became 3 months, then 8 months -- I extended it because I like the place and I had free accomodations. When I arrived back, there were letters for me from the bank lawyers. I was overdue for a long time -- It turned out, there were no payments made to the bank -- they didn't know how credit cards worked. Ok, no worries, I accepted a sales job, but was not good at it -- I relied on commissions which were not enough, so I learned a very bad habit: I learned about cash advances...very bad!!!! Never imagined the interests were computed daily. I withdrew a total of 18K over a certain period. I was way over the limit and not making any money. Then I got shy and hid from the bank. They got pissed and slapped me penalties and daily charges, my bill shot up easily to 40K. They got tired and got an agency to collect: they added legal fees and incidentals, and after a while my bill was 80K -- they're still charging interests on the unpaid amount. I was buried alive in tons of debt and I haven't even encashed my very first real paycheck. A very good cousin offered to help -- never financially but a sound advice. He told to call up the bank and explain my situation. I got to talk to a lawyer who was stubborn, so I asked to talk to the credit/collection manager instead. She was only giving me the option to pay up everything within 6 months or the lawyer will file a case. I told her that I'm in between jobs and had series of interviews. Then she asked matter-of-factly: "How much can you afford?" Very honestly (swallowing all traces of pride), I said I can only set aside 3,000 pesos a month but with a 2-month grace period. I was expecting her to shout back at me, instead I got a bonus: if I could settle 3,000 a month, she'll take out interests charged after the card was cancelled, I'll only get to pay the original overdue amount plus penalties but she'll need to include a little interest as cost of money. I got the deal: 3,000 a month for 18 months, and she'll grant the 2-month grace period. I literally cried: I got a better problem: land in a job that will pay at least 10K and I can honor the 3K to the bank. I did land in a job that paid 8,500. I got a weekend job doing programming for a small company; I got extra for teaching a choir on a Saturday night.

     

    For almost 2 years that was all I did -- Afterwards, I got to earn more, but paid mostly in cash -- no plastics. That lasted for another 5 years. I got a chance to open up a business so I left my job and focused on working for myself. It paid off, got a business deal that earned me 750K in a snap. I got an offer for a credit card and I thought, I think I'm ready to be a plastic admirer again -- you know charging for groceries and restaurant bills and pay them in full after 2 weeks, so no interest. I got denied, and I pitied myself. A friend told me about the CIBI (Credit Investigation Bureau, Inc.) it's like a detective agency. They pry on you and keep all your financial records, including the checks that you issue. They then sell the info to the banks -- so the banks quite literally fight each other for your business -- but if you screw up, they share information among themselves how risky a client you are. So I followed the advice I gave above.

     

    Oh, I remembered, I have great power left that the banks will be fighting each other over. I had 750K in my bank account. So I decided to buy a new car. The year was 2000 and it was selling for 600K. I could very well pay for it in cash -- instead, I used it to clear my name. I approached a more client-oriented bank and told them that I'd like to buy a car -- gave them the model and the dealer. They checked their records and saw a problem with my accounts: they "whispered" something like "very high-risk". So they asked for proof of income: I showed my business papers, tax returns, references -- no good. Then I showed my bank statement -- they saw something they liked: cold, hard cash. Did I mention they were client-centric? They called the other bank I had trouble with, gave me a reference letter and instructed to go to the main branch of the other bank. I had to get a certificate of full payment. Apparently, the banks are fast enough to submit your name in the watchlist when you screw up; but never exerts effort to fix it up even when you've settled. So, I got the certificate. Another question, can you shoulder 40% of the cost of the car? Perhaps as a goodwill gesture. No problem. Another small problem: I can only take the 4-year terms. Fine. I signed-up and they processed it the same day and I drove my brand-new car at exactly 7pm. The power of cash.

     

    I paid religiously for 3 years until I decided to preterminate, saving me 12-months' worth of interests. I then knew that I had done my job -- I'm clean again. How did I know? Almost immediately, the agents started calling me again, offering credit cards, loans, insurance -- all the works.

     

    Through it all, I learned the value of integrity and reputation; and a much-needed habit of paying up.

     

    8 years hence, I closed up shop and got back into regular employment again and rose from the ranks out of diligence and hard work. I sold the car I used as "collateral" to rebuild my image. Most importantly, I got back my self-confidence. At this point, my monthly income shot up 1,200% ever since the 8,500-a month job I signed up for. I now own a Citibank Gold credit card with 250K credit limit; an American Express card with $5,000 spending limit, another silver card with 150K credit line. Well, I always carry it but more of as a status symbol, because I never really had an urge to splurge; on rare occasions when I do, I pay it up by month-end without incurring a cent in interests. The banks are so impish on tempting me to the dark side again by increasing my credit limits automatically every single year -- they must never have earned a single cent on me, that's why.

     

    I know this is a lengthy piece but if it could teach a lesson and prove a point, then pardon me.

     

    I just felt concerned about the guy who started this thread, who may have owed to the teeth at some point. Remember: the light at the end of the tunnel is not always an incoming train (meant to crush you, haha)... and what doesn't k*ll you makes you stronger. Three things are most certain in this world which we must not fear because they end up teaching us to care: Death, Debt and Taxes. So if you're still afraid: of dying, of paying the right amount of taxes, of owning up to our debt: be a man! Face it, and it will surely go away. You'll end up being stronger than ever -- since when the time comes, you have not only conquered your fears, you've mastered your own self, and drawn up your destiny. Believe me, you're meant for higher things -- it's up to you to accept it and act on it. The bad memories do serve a very useful purpose of not repeating the same mistake twice.

     

    I told you, it's difficult... but never improbable, much less impossible.

     

    Nice piece--i got something here

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